The emergence of the pandemic in 2020, an unprecedented adverse event, meant extraordinary measures had to be taken. Both the health crisis and the decisions taken to face it had a major effect on the normal productive activity, consumption, the economy as a whole and, as a consequence, risk management in the banking business.
The Spanish government adopted a range of measures to alleviate the situation for vulnerable families, guaranteeing the flow of credit needed to protect companies and self-employed workers. These established two types of legislative moratoriums for individuals and business owners who qualified as economically vulnerable, one for mortgage-secured loans and another for unsecured credit. In both cases, borrowers' payment obligations were temporarily suspended at no extra cost.
These initiatives were compounded by the implementation by financial institutions of two types of non-legislative moratoriums, mortaged-secured and unsecured, aimed at customers with temporary lack of liquidity. Bankinter established a grace period with a deferral of up to four months for the payment of principal which, depending on each individual situation, can be extended up to a maximum of twelve months.
Meanwhile, Spain's official credit institute (Instituto de Crédito Oficial or ICO) approved a series of guarantee lines to ensure that self-employed workers, SMEs and large companies have the necessary liquidity and working capital to maintain production and employment. These facilities are a powerful instrument to avoid the destruction of the production structure and support the extraordinary financing needs of customers. In November, the government approved an extension to the maturity date of these guarantees for an additional period of three years, to a maximum term of eight years from arrangement of the transaction guaranteed, and a 12-month increase in the grace period, to a maximum of 24 months.
The Portuguese government introduced similar measures for the same purposes, with moratoriums for individuals and companies, through credit lines coordinated by mutual guarantee companies.
Since the start of the health crisis, Bankinter's first priority has been to meet the extraordinary financial needs of its customers. It has been very active in applying these aid measures, along with other initiatives described in other sections of this report. At close of the financial year, the moratorium and financing programmes had reached the figures in the table below.
As you can see, at the close of the financial year the gross book value of the Group's moratoriums was 2.206 billion euros, with 5.794 billion euros of financing under public guarantee schemes. These balances, as a whole, represent 11.2% of eligible risk.
Analysing the distribution of aid by branches of activity, the wholesale and retail trade sectors stand out markedly. Next comes the manufacturing industry, due to the large dimension of this sectoral aggregate. In relative terms, the hotel industry and artistic, recreational and entertainment activities also stand out.
Implementation of these measures has had a clear positive effect on containing the economic effects of the pandemic. Proof of this is that the volume of exposure with unpaid balances is at its lowest in recent years, being 39% lower in December 2020 than at the end of 2019. As such, the potential impairment of the loan portfolio will take a while to show up, based on the accumulated fall in activity. Bankinter is actively preparing to deal with the worse times that are expected to come in 2021.
Legislative and non-legislative moratoriums |
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Gross carrying amount, thousands of euros |
Distribution by phases |
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Number of obligors |
Total |
Legislative moratoriums |
Unexpired moratoriums |
1 |
2 |
3 |
Households |
|
1,704,780 |
817,968 |
1,131,603 |
95.2% |
4.4% |
0.4% |
Secured by residential property |
|
1,537,036 |
768,816 |
1,101,205 |
|
|
|
Non-financial corporations |
|
484,328 |
484,232 |
461,664 |
87.6% |
11.4% |
1.0% |
Small- and medium-sized enterprises |
|
386,960 |
386,863 |
368,239 |
|
|
|
Secured by commercial property |
|
152,547 |
152,547 |
149,948 |
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|
|
Total loans and advances |
20,162 |
2,206,491 |
1,319,582 |
1,610,340 |
|
93.0% |
6.4% |
Newly originated loans and advances subject to public guarantee schemes in the context of the COVID-19 crisis |
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Number of obligors |
Gross carrying amount, thousands of euros |
1 |
2 |
3 |
Households |
|
62,447 |
99.9% |
0.0% |
0.1% |
Non-financial corporations |
|
5,707,242 |
97.8% |
2.0% |
0.2% |
Total loans and advances |
30,664 |
5,794,119 |
97.9% |
1.9% |
0.2% |
In these extraordinary circumstances, the Group is sticking to its principles and risk appetite levels, and is maintaining a prudent risk profile. Risk management is one of the cornerstones of Bankinter's competitive strategy. The Bank has a risk management model of proven effectiveness that is in line with regulatory standards and best international practices, in proportion to the scale and complexity of its business activities.
The board of directors is ultimately responsible for risk management. It approves the risk strategy and, in particular, defines the risk appetite framework. The risk appetite framework is an internal governance document that defines:
The Risk Appetite Framework establishes the criteria that govern the Group's risk strategy:
Risk appetite statement. To maximise its long-term value, Bankinter carries out its business activities with a prudent risk profile, pursuing a stable balance sheet and a recurring and sound income statement.
Risk management principles. The risk appetite and tolerance assumed by the Group are consistent with the following principles:
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